Sensex up 35 pts as inflation dips sharply

Mumbai: The Bombay Stock Exchange (BSE) Sensex erased early losses and ended 35 points up at 5-week high of 16,189.36 Monday as inflation logged a sharp dip, although investors remained cautious because of weak global cues due to credit downgrade of nine euro-zone countries by ratings agency S&P.

Capital goods and IT stocks rallied. However, refinery stocks, mainly the BSE index heavyweight RIL, were at the receiving end. RIL was top loser from the Sensex pack and fell 2.55 per cent. The 30-share Sensex resumed weak and fell 117 points due to sluggish Asian stocks on persisting euro-zone debt crisis and S&P`s cutting the credit ratings of nine European nations including France (the regions second largest economy).

It bounced back to close at 5-week high of 16,189.36, up 34.74 points or 0.22 per cent, as a sharp fall in inflation numbers released Monday boosted investor confidence. Analysts said inflation at 2-year low of 7.47 per cent for December raised hopes that the Reserve Bank would cut lending rates in view of moderation in the rate of price rise. The 50-issue NSE index Nifty gained 7.90 points or 0.16 per cent at 4,873.90.

"Markets had a gap down opening on weak oversees cues as S&P cut down the ratings of some European nations. Selling pressure on heavyweight Reliance counter, aided the bearish sentiments. The inflation figure was comforting as compared to the November inflation figure of 9.11 per cent," said Shanu Goel, Research Analyst at Bonanza Portfolio.

Overall, Infosys, L&T, ITC, TCS, SBI, Tata Motors, Bhel and Bharti Airtel supported the market. RIL, HDFC Bank, HDFC, HUL, ONGC and NTPC fell. Analysts said investor sentiment remained cautious despite fall in inflation, especially on RBI`s lowering lending rates. "Increasingly divergent views are being generated among the market players whether RBI could take any easing stance in its upcoming policy meeting (next week)." said Milan Bavishi, Research Head at Inventure Growth and Securities.

"One risk that global markets face from here on is that of crude oil prices. Though crude oil prices have corrected in the last one week, any upside here on above USD 100 could trigger fresh buying and the rally could be sharp," he added. Meanwhile, key indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were down by up to 1.71 per cent. The major European stock markets showed a mixed trend in the afternoon deals. Overall, 15 of the 30 Sensex scrips closed in the green.

Bhel gained 3.67 per cent, Maruti Suzuki (2.89 pc), L&T (2.56 pc), Sterlite (2.56 pc), SBI (2.22 pc), Tata Motors (2.20 pc), TCS (1.91 pc), Infosys (1.88 pc), Bharti (1.58 pc), Wipro (1.57 pc), Tata Power (1.56 pc), Tata Steel (1.44 pc) and ITC (1.14 pc). However, NTPC dipped 2.35 per cent, HDFC Bank (1.74 pc), HUL (1.56 pc), DLF (1.55 pc), Sun Pharma (1.47 pc), Cipla (1.45 pc), ONGC (1.25 pc) and HDFC (1.13 pc). The market breadth of BSE improved slightly as 1,403 stocks closed with gains while 1,344 finished with losses. The total market turnover dropped sharply to Rs 2,092.59 crore from Rs 2,742.45 crore last Friday.